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Bankruptcy Exemptions: Schedule C

Choosing your exemptions is critical to what property you keep after bankruptcy

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The Schedule C is arguably the most important document that you complete when filing for bankruptcy, no matter the chapter. Schedule C contains your claims of exemption. These exemptions permit you to keep property which would otherwise become property of the bankruptcy estate and the bankruptcy trustee.

Basis

Bankruptcy exemptions are based in state and federal law. Each of the individual states have enacted their own bankruptcy exemptions. Congress has also passed a set of federal exemptions. Depending upon where you live and file for bankruptcy, the law of the state may permit you to only use the state exemptions, as opposed to the federal exemptions. For example, in California, you may only choose state exemptions and not federal exemptions. You can read more about the various exemptions available in each state.

Completing Schedule C

At the top of Schedule C, you will notice that the document requires that you select a box if you are claiming exemptions pursuant to 11 U.S.C. section 522(b)(2) or 11 U.S.C. section 522(b)(3). If you choose state law exemptions, select 522(b)(3); section 522(b)(2) indicates that you have chosen federal law exemptions. Some states do not allow you to choose federal law exemptions. Consult with a bankruptcy lawyer to determine if this is the case in your state of residence.

Column 1: Description of Property

In this first column, you must list each and every item of personal and real property which you wish to claim as exempt. If you do not list property and exempt it, the trustee may take it and sell it! You should use the same descriptions that you used in Schedule A and Schedule B.

Column 2: Specify Law Providing Each Exemption

The second column requires that you cite to the specific code section that provides for the exemption. For example, in California, you would cite California Code of Civil Procedure section 703.140(b)(3) for exemptions in household goods and clothing.

Column 3: Value of Claimed Exemption

In the third column, you must state the full amount that the exemption permits. For example, section 703.140(b)(3), in California, allows a value of $550 per item. Thus, in that example, you would put $550 in the third column.

Column 4: Current Value of Property Without Deducting Exemption

The last column is fairly straightforward. It merely requires that you indicate the value of the property. This information should match the amounts indicated in Schedules A and B for your personal and real property. Remember that value is determined at the time you file for bankruptcy, not when you actually bought the property (i.e., four years ago).

Objections to Your Claims of Exemption

After you file your bankruptcy, any creditor, the bankruptcy trustee, or the U.S. Trustee can object to your claims of exemption. This is done by filing a written objection with the bankruptcy court. A hearing will be conducted before a bankruptcy judge on the objection. A party may object to your claims of exemption for a variety of reasons, such as improperly categorized exemptions (claiming an exemption in clothes under an exemption statute for a car). An objection to your claims of exemption must be filed within 30 days that the trustee concludes your meeting of creditors, or within 30 days of any amendments to the Schedule C.

Allowance of Exemptions

If no one objects to your claims of exemptions within the above-referenced 30 day periods, your exemptions will be allowed by "operation of law." This means that your exemptions are automatically allowed and you can keep all of the exempted property and the trustee cannot sell it. Allowance of your exemptions in bankruptcy is crucial to retaining assets.

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